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Local hospital merger talks are in the air

The possible sale of Oakwood Healthcare Inc. isn't the only example of local hospital merger chatter; industry sources say merger chatter is as strong as it has been in five years.

Royal Oak-based Beaumont Health System, which is rumored to be in talks with Oakwood along with for-profit Tenet Health Care, also is believed to be discussing a possible merger or affiliation with Botsford Hospital in Farmington Hills, an independent osteopathic hospital. Beaumont and Botsford officials declined to comment.

"The Affordable Care Act provides opportunity for 330-bed Botsford Health Care to create strategic affiliations and partnerships that may generate even greater value for the communities we serve.

"These are dynamic strategic considerations that are necessary to adapt to the health care reform agenda. If and when Botsford Health Care chooses to align with other organizations, an announcement will be made."

Garden City Hospital, the area's third-largest independent hospital with 220 beds, also is said to be in merger or sale talks and close to an agreement. The osteopathic hospital has been the subject of sale rumors the past three years.

Two sources told Crain's that Garden City is in discussions to become part of Prime Health Care, an Ontario, Calif.-based for-profit management company. Prime owns 25 hospitals in six states.

Crain's was unsuccessful in reaching an official with Prime for comment.

Gary Ley, CEO of Garden City, declined to talk about the hospital board's strategies or whether talks were underway with Prime.

"Our board has had many discussions about maintaining confidentiality of their deliberations, so I am not going to go against their wishes," Ley said in a statement to Crain's.

Outside of metro Detroit, Mackinac Straits Health System in St. Ignace and the four-hospital MidMichigan Health in Midland announced on Jan. 21 they have begun affiliation discussions. The two health care organizations had been working cooperatively on surgical services since last fall.

At least one independent is hoping to remain that way.

After considering a sale to Vanguard two years ago, 290-bed Crittenton Hospital Medical Center in Rochester Hills last July hired a new CEO, Roy Powell, to continue operational improvements that it hopes will allow it to remain independent.

Moody's Investors Services last September downgraded Crittenton's bond rating to Baa3 from Baa2 on $107.3 million bonds issued by the Michigan State Hospital Finance Authority. Moody's said the hospital "has endured a trend of unfavorable financial performance, a balance sheet that has eroded over the last several years and additional debt that leverages the hospital."